Get retirement investing advice—for less

If your retirement years are more about work than leisure, you may not be spending as much time as you should monitoring and managing your investments. A growing number of companies are eager to convince you that they can help.

For the most part, these services are aimed at people who have a nest egg, but not enough savings to warrant shelling out for an ongoing relationship with a financial adviser.

Precisely how they help investors varies widely. For example, for a flat fee of about $200 a year, Smart401k will look at the investment options in your 401(k) plan, assess your goals, and advise you how best to invest. They’ll also monitor the market and alert you if you should adjust your allocation, plus send periodic rebalancing reminders. When you call for help, you talk to a licensed adviser, and the company promises unbiased advice.

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Similarly, MyPlanIQ helps people devise an asset allocation strategy for their retirement savings, though they also offer advice on taxable accounts. Meanwhile, Wealthfront and Betterment are online investment managers. You hand over your money for investing in one of their low-cost portfolios.

RebalanceIRA is a relatively new kid on the block, but its co-founder, Mitch Tuchman, is founder of MarketRiders, another company that aims to make low-cost investing simple and automated, both for your taxable and tax-deferred accounts.

As its name implies, RebalanceIRA takes your individual retirement account and invests it for you in a low-cost portfolio. Their fee is 0.5% of assets, not counting the cost of the underlying exchange-trade-fund, or ETF, investments (on average about 0.2%).

The company said it aims to keep rebalancing costs low by using your new contributions to buy into out-of-balance asset classes, rather than incurring trading costs. Their minimum investment is $100,000, though if you’ve got $75,000 and are making continuous contributions, they’ll take you on. You can call to talk to an adviser, too.

What they don’t do

None of these services will solve all of your investing problems, mainly because they don’t take a holistic look at your complete personal-finance picture. As just one example, RebalanceIRA will figure your required minimum distributions for you when you hit age 70½, but the service won’t necessarily help you with broader questions about generating income in retirement or estate-planning.

At least one financial adviser isn’t sold on these services. Speaking broadly, “For virtually all of these platforms, they don’t offer any substantive advice outside the construction of the investment portfolio itself,” Michael Kitces said in emailed comments. Kitces is a partner at Pinnacle Advisory Group, a money-management firm in Columbia, Md., and publisher of e-newsletter The Kitces Report. (He also writes for MarketWatch’s RetireMentors section.)

“They won’t tell you what you need to save for retirement, whether you have enough, which types of accounts to use, how to coordinate savings or spending amongst multiple buckets,” he said. “For better and for worse, they are generally ‘just’ a tool to construct a passive, strategic, automatically rebalanced portfolio.”

The solution for some retirement savers might be to tap into these services while they’re working, and as they approach retirement, shell out for a consultation with a fee-only financial planner. (One option: Search for a planner on the Garrett Planning Network.)

Keeping costs low

For his part, Tuchman, of RebalanceIRA, said the various services in general, including RebalanceIRA, help investors maintain control over costs—and that can have a large impact on a successful retirement-savings strategy.

“Most people are still using an independent broker. It’s parked somewhere in an account,” Tuchman said. “They’re not paying attention to it or they’re buying actively managed funds and getting charged a lot of money. We want people to understand they are generally having their [investment account] raped and pillaged by the financial-services industry and the thing in common with all of us is we want to stop the bleeding so that people can get a decent rate of return.”

Both Wealthfront and RebalanceIRA can boast a connection to Burton Malkiel, author of “A Random Walk Down Wall Street” and emeritus professor of economics at Princeton University. Malkiel is Wealthfront’s chief investment officer and is a member of RebalanceIRA’s investment advisory board, along with two other well-known purveyors of low-cost investing, Charles Ellis, investor and author of “Winning the Loser’s Game,” and Jay Vivian, former director of IBM’s retirement plans.

While individual investors can and do create low-cost portfolios all by themselves, there is something to be said for having a professional paying attention to the market.

For example, Malkiel said in a telephone interview regarding RebalanceIRA: “They won’t say this officially, but I think Vanguard is likely to bring an emerging market bond ETF to market in 2013 and it will have an expense ratio that’s probably half of the existing product. We’re going to be right on top of it. If and when that happens, we’ll shift people right away,” he said.

“Can an individual do that her or himself? Probably. But you’ve got to be following the markets and knowing what ETFs are coming down the pike,” he said.

Plus, investors are well known for doing exactly the opposite of what’s best for their portfolio, Tuchman said. “When people get scared, when equities are in the tank, what we know is people aren’t rebalancing—they’re pulling money out,” he said. “If they have some trustworthy people who are doing this, if they need a bit of handholding, they can actually call somebody up over the phone, we think that’s a very important service.”

Watch for more services going forward. As the report notes, this is only the beginning for online investing platforms.

“Consumer demand for cheaper and more transparent financial solutions shows no sign of abating,” the Corporate Insight report said. “As a result, we expect the number of these investing and advice start-ups—and their unique business models—to continue to grow.”

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